Clearview Portfolio Consulting 2025 Market Recap
Key Points:
• The S&P500 notched its third consecutive year of double-digit positive returns, gaining 17.9% in 2025.
• International stocks were the best performers with both developed and emerging markets up over 30%.
• Bonds finished the year with solid gains as the Fed continues to ease interest rates.
Financial markets had a strong year in 2025. After inflation across the globe surged from the pandemic, its moderation saw central banks across the globe ease financial conditions (lower rates) pushing stocks and bonds higher. In the US, the S&P500 saw its third consecutive year of strong returns with an 18% gain. This comes on the back of a 25% return in 2024 and 26% in 2023 for the large cap index. While all sectors of the market were positive for the year, communication services was the top performer, gaining 33.6%. Technology (+24%) and industrials (+19%) were also winners while real estate (+3.2%) and consumer staples (+3.9%) were the laggards. Value stocks underperformed growth stocks for the third consecutive year, but rich valuations in the growthier parts of the market may result in some rotation towards cyclical sectors of the economy as the AI story broadens. The Russell 2000, which measures small cap stocks, gained 12.8% for the year. International stocks were the best performers as developed non-US and emerging markets returned over 30%.
The US economy grew by 4.3% (annualized) in the third quarter, beating analyst estimates.The government shutdown will likely impact GDP growth in the fourth quarter, but the recession that some economists predicted after tariffs were announced doesn’t seem to be on the horizon. Future interest rate policy from the Federal Reserve remains unclear as stickier inflation (2.7%), a cooling labor market (4.6% unemployment rate) and a newly elected Fed Chairman this May will be closely watched. While the markets and economy seem to be in good shape, consumer sentiment and confidence readings are mixed.
Bonds had their best year since 2020, with the Bloomberg US Aggregate Index up 7.3%. Yields fell across the short and intermediate Treasury curve as the Fed cut rates three times during the year. As we head into 2026, yields in high quality fixed income are attractive when accounting for inflation. Credit spreads remain tight as corporate fundamentals appear healthy. The economy is expected to continue to grow into the new year. JPMorgan thinks the revitalization of the US manufacturing sector will fuel economic growth in the coming quarters. Reshoring, supply chain optimization, automation, robotics and AI will help drive employment and competitive efficiencies across many sectors of the market, not just technology. As always, long-term investors are usually best suited in globally diversified portfolios with appropriate risk based on their financial plans. Happy New Year!
Sources: Morningstar Direct, Wall Street Journal, First Trust, JPMorgan